Day 17 - settled our account with Donnay Dealers, and received a 6% settlement discount. The amount owing to this creditor on 1 August 2018 was R4800.00. Goods purchased on credit from Donnay Dealers during August 2018 totaled R6400 (Including VAT). Credit notes received from this creditor during the same period amounted to R3000.00 (including VAT). Question 2: .Interpret the information given above, and make the necessary entries in the General Journal of Oribi Dealers for August 2018. .Calculate Trade payables (Donnay Dealers), VAT Output and Trading Inventory.

Here are the calculations and the General Journal entries for Oribi Dealers.

Assumptions:

• The VAT rate is 15%.

Calculations for General Journal Entries:

1. Purchases on credit from Donnay Dealers:
The total amount for goods purchased was R6400.00, including VAT.

• Trading Inventory (excluding VAT) = $\frac{\text{R}6400.00}{1.15} = \text{R}5565.22$
• VAT Input = $\text{R}6400.00 - \text{R}5565.22 = \text{R}834.78$
• Trade Payables (Donnay Dealers) will be credited by R6400.00.

2. Credit notes received from Donnay Dealers:
The credit note was for R3000.00, including VAT.

• Trading Inventory (reduction, excluding VAT) = $\frac{\text{R}3000.00}{1.15} = \text{R}2608.70$
• VAT Input (reduction) = $\text{R}3000.00 - \text{R}2608.70 = \text{R}391.30$
• Trade Payables (Donnay Dealers) will be debited by R3000.00.

3. Settlement on 17 August 2018:
First, calculate Donnay Dealers' balance before the payment:

• Opening Balance (1 Aug): R4800.00 (Credit)
• Purchases (during Aug): R6400.00 (Credit)
• Credit Notes (during Aug): R3000.00 (Debit)
• Balance before payment = $\text{R}4800.00 + \text{R}6400.00 - \text{R}3000.00 = \text{R}8200.00$ (Credit)

Oribi Dealers settled the account and received a 6% settlement discount.

• Settlement Discount Received = $\text{R}8200.00 \times 0.06 = \text{R}492.00$
• Amount paid to Donnay Dealers = $\text{R}8200.00 - \text{R}492.00 = \text{R}7708.00$
• Trade Payables (Donnay Dealers) will be debited by R8200.00.
• Bank will be credited by R7708.00.
• Settlement Discount Received will be credited by R492.00.

General Journal of Oribi Dealers for August 2018

$$\begin{array}{|l|l|r|r|} \hline \textbf{Date} & \textbf{Account and Explanation} & \textbf{Debit (R)} & \textbf{Credit (R)} \\ \hline \text{Aug (date)} & \text{Trading Inventory} & 5,565.22 & \\ & \text{VAT Input} & 834.78 & \\ & \quad \text{Trade Payables (Donnay Dealers)} & & 6,400.00 \\ & \text{Credit purchases from Donnay Dealers} & & \\ \hline \text{Aug (date)} & \text{Trade Payables (Donnay Dealers)} & 3,000.00 & \\ & \quad \text{Trading Inventory} & & 2,608.70 \\ & \quad \text{VAT Input} & & 391.30 \\ & \text{Credit note received from Donnay Dealers} & & \\ \hline \text{Aug 17} & \text{Trade Payables (Donnay Dealers)} & 8,200.00 & \\ & \quad \text{Bank} & & 7,708.00 \\ & \quad \text{Settlement Discount Received} & & 492.00 \\ & \text{Cheque issued in full settlement to Donnay Dealers} & & \\ \hline \end{array}$$

Summary of Requested Calculations:

• Trade Payables (Donnay Dealers) in the General Journal:
  • Credit for purchases: $\boxed{\text{R}6,400.00}$
  • Debit for credit notes: $\boxed{\text{R}3,000.00}$
  • Debit for settlement: $\boxed{\text{R}8,200.00}$
• VAT Input in the General Journal:
  • Debit for purchases: $\boxed{\text{R}834.78}$
  • Credit for credit notes: $\boxed{\text{R}391.30}$
• Trading Inventory in the General Journal:
  • Debit for purchases: $\boxed{\text{R}5,565.22}$
  • Credit for credit notes: $\boxed{\text{R}2,608.70}$